The Organization for Economic Cooperation and Development predicted that Korea's economic growth will slow down to 3.8 percent next year, lowering its previous prediction of 4.5 percent.
In its latest outlook published on Monday, the OECD anticipated that the economy will grow by 3.7 percent in 2011, down from its original forecast of 4.6 percent due to sluggish world trade and domestic demand.
The main risk factors for the economy were cited as increased household debt and withering exports due to an unstable world economy. The OECD said that after resolving such external uncertainties, the Bank of Korea needs to raise its benchmark interest rate to curtail inflation.
The organization expressed a negative outlook on the world economy by projecting a global economic growth rate of 3.8 percent for this year and 3.4 percent for 2012, down 0.4 percentage point and 1.2 percentage point, respectively, from its estimates published in May.
These figures hinged on Europe resolving its financial crisis with no more major sovereign debt defaults and the U.S. emerging from its difficulties to get its stalled economy back on track.
The OECD predicted that the average economic growth rate of its member countries will be just 1.6 percent next year, or 0.2 percent for countries in the eurozone.